Aviva Investors, the global asset management arm of Aviva PLC, expects the companies it invests in to deliver tangible and transparent progress on a wider definition of sustainability in 2022.
In his Annual Letter to Chairs, Mark Versey, Chief Executive of the £262 billion asset manager, said the firm would judge companies this year against expectations on biodiversity and human rights as much as climate and executive pay. The Letter will be distributed to 1500 companies in around 30 countries.
“We want to encourage companies to consider the whole picture of sustainability because this is how they will create the greatest return for shareholders, while helping to build a better future for society. Companies must now turn their pledges into concrete and measurable plans of delivery. Our letter sets out clear expectations as to how they should do this, and what those plans must address across climate impact, biodiversity and human rights,” Versey said.
Versey added that addressing just one area would be a less effective approach because it might trigger negative impacts that would undermine another aspect of the transition to a sustainable economy.
He cited the example of companies developing climate action plans, which Aviva Investors believes must also manage dependencies and impacts on nature, as well as supporting a just social transition for workers, customers and communities. “Simply cutting emissions but allowing the destruction of the rain forest to continue will do little to reverse global warming. Companies need to adopt an integrated approach for maximum benefit,” he said.
Engagement “with teeth”
Aviva Investors will hold boards and individual directors accountable at companies where the pace of change on climate, biodiversity and human rights does not exhibit sufficient urgency, the letter revealed. The asset manager also wants executive compensation structures and performance targets to reflect sustainability goals.
Aviva Investors uses it stewardship programme to help shape change at investee companies and undertook 1277 substantive engagements in 2021. It voted at 6648 shareholder meetings – and voted against 26% of management proposals tabled. ShareAction ranked the firm seventh globally for its voting record on the most significant environmental (94%) and social (90%) shareholder resolutions of last year.
In 2021, Aviva Investors voted against the re-election of directors at 137 companies for lack of progress on ethnic diversity and opposed directors at 85 companies due to human rights concerns. The firm also rejected 33% and 68% of executive pay proposals in the UK and US, respectively, on concerns over quantum and structure.
The asset manager will divest in cases where companies consistently fail to meet its requirements. Last year, Aviva Investors introduced a 1.5 degree centigrade aligned engagement programme focused on 30 of the world’s worst carbon emitters, with an ultimate sanction of divestment if its expectations are not met over one to three years.